Silver Forecast: Fears about tariffs hit silver hard, is a deeper decline imminent?

On Thursday (July 31) in the European session, silver prices continued their decline, falling about 1.3% during the session and briefly falling below the key 50-day moving average of $36.50.

After falling to an intraday low of $36.21, the market rallied slightly to $36.44 as bottom fishing buyers entered the market.

The pressure on silver reflects a broader correction from last week's high of $39.53, with rising concerns about trade tensions and weaker industrial demand weighing heavily on sentiment.

Tariff tensions cloud the outlook for industrial demand

One of the main drivers of silver's recent sell-off has been renewed concerns about global trade.

President Trump's announcement of large-scale tariffs - including a 15 percent tariff on South Korean goods and up to 50 percent on Brazilian imports - has raised concerns among traders of industrial metals.

While gold is benefiting from safe-haven inflows, silver has been hit by its industrial properties. The pending tariff talks with China are particularly critical, raising doubts about future demand in the silver-dependent manufacturing and technology sectors.

The dollar weakened, the Federal Reserve stayed put, and gold rallied

While gold and silver tend to move in tandem during macro-driven trading sessions, the gold recovery has not helped silver, which rose more than 1 per cent on Thursday as the dollar retreated and US Treasury yields fell.

The Federal Reserve kept interest rates steady at a range of 4.25% to 4.50%, but hinted at uncertainty about the outlook for the fall, and Chairperson Powell offered no clear guidance.

The forthcoming report on core personal consumption expenditures (PCE) - forecast to rise 0.3 per cent on a monthly basis - will be closely watched to gauge inflation risks. An unexpected upside in the report could reignite bets on the Fed's hawkish stance and, in turn, put pressure on metals prices again.

Technical analysis: $36.50 in focus, $38.51 a key resistance level

From a technical perspective, silver's pullback from $39.53 has fallen below the short-term support at $37.50, and a deeper pullback is likely unless the 50-day simple moving average holds.

The $36.50 level has temporarily served as a bottom support. If the sell-off continues, the next key support level is at $35.28.

On the upside, the bulls need to recover $38.51 to regain control, which was a resistance level before this decline.

As long as the 200-day simple moving average (currently at $32.96) remains intact, the overall trend remains positive, but the short-term signal is worsening.

Outlook: Caution is needed before trade uncertainties are resolved

(Daily chart of spot silver, source: Internet)

Silver's short-term bias has turned defensive. The market remains vulnerable below $37.50, especially as tariff uncertainty threatens industrial demand.

Unless trade tensions ease or gold rallies significantly above $3,303, silver is likely to remain range-bound or move further lower.

Traders should keep a close eye on the support area at $36.50 - a sustained break below this level could open up room for a fall to $35.28.

Until there are clearer signals from the Federal Reserve or trade, silver could see a volatile move in early August.